Expense management

Expense management refers to the systems deployed by a business to process, pay, and audit employee-initiated expenses. These costs include, but are not limited to, expenses incurred for travel and entertainment. Expense management includes the policies and procedures which govern such spending, as well as the technologies and services utilized to process and analyze the data associated with it.

Software to manage the expense claim, authorisation, audit and repayment processes can be obtained from organisations that provide a licensed software, implementation and support service, or alternatively, from Software as a service (SAAS) providers. SAAS providers offer on-demand web-based applications managed by a third party to improve the productivity of expense management.

Steps

Expense management automation has two equally important aspects - the process an employee follows in order to complete an expense claim (for example logging a hotel receipt or submitting mobile phone records) and the activity accounts or finance staff undertake to process the claim within the finance system.

Typically, a manual process will involve an employee completing a paper, spreadsheet, or Graphical User Interface-based expense report which they then forward, along with the relevant tax invoices (receipts), to a manager or other controller for approval. Once the manager has approved the claim, they forward it on to the accounts department for processing. The accounts staff then key each expense item into the company's finance system before filing the claim and receipts away. In a Software as a Service implementation, these processes are largely automated and the submission and approvals processes are transacted electronically.

Expense Management automation is the means by which an organization can significantly reduce transaction costs and improve management control when logging, calculating and processing corporate expenses. Independent research evaluating the use of automated expense management systems has confirmed that the cost of processing an expense claim is reduced as the level of automation increases.

As found in an Aberdeen study on expense management automation in February 2007,^[1] there are three main factors that drive an organization to automate their expense management processes:

• Compliance focus: The need to reduce the current risk levels posed by non-compliance with internal policies and external tax/government regulations
• Cost reduction: The competitive pressure to reduce processing and auditing costs associated with expense reports
• Employee productivity: The organizational pressure to improve employee productivity and satisfaction

An automated solution typically provides the ability to code, approve and report on expenses.

Types of expense management

Business strategies are tailored to various types of expense management:

Telecom expense management

The management of wireless and wireline service and asset expenses is labeled as Telecom expense management. Historically, Telecom expenses were managed as general services. In recent years, more and more organizations associate telecom expense to IT services. This change in management is due to a shift in global business strategies towards evolving technologies.^[2]

Travel expense management

Travel expense management or mobility management is defined as the means to organize and manage travel arrangements and costs for traveling employee.^[3]

Technology expense management

Technology expense management or IT expense management is the management of technology costs such as software licenses, computer equipment, applications, etc. Technology expense management also include the management of services related to technology (SaaS, PaaS, etc.). Technology expense management activities are often performed through the use of various technology tools (bill of IT, management software, workflows, etc.)^[4]

Inventory management

Inventory management consist in all the activities a company does to manage what it owns and uses to function. Inventory management can also referred to the management of the quantity and quality of product for sale.^[5]

Choosing an Expense Management Solution

While enterprise-level corporations have accounting departments capable of selecting an expense management solution appropriate for the business, many small-to-medium business owners have a difficult time knowing which SaaS solution to choose. Many accounting advisory partners are available to help the decision-making process,^[6] and will usually make recommendations based on the following criteria:

• Direct integration with accounting system: Can the expense data flow directly into the accounting system, coded appropriately, without the need for any manual data entry?
• Ease of employee use: Will the software be adopted by employees? Is there a mobile app? Does the automation component cut down on the need for employee data entry (via technologies such as Optical Character Recognition scanning)?
• Compliance & customization: Can the software be configured to evaluate expenses against company expense policies? Can approval processes be adjusted based on project, department or spend?
• Fraud prevention: Does the software have expense fraud detection capabilities, such a duplicate identification?

One of the biggest problems with expense management solution implementation is Change management. In today's world Mobility and Accessibility of Enterprise Apps are equal if not more, in importance to Integrations and customization.^[7]

See also

• Corporate travel management

References